(Edgar Glimpses Via Acquire Media NewsEdge) Except for the historical information contained herein, the matters addressed in
this Item 2 contain forward-looking statements. These forward-looking statements
involve risks and uncertainties, including those described in the Company's
Annual Report on Form 10-K, filed with the Security and Exchanges Commission
April 30, 2013. Actual results, events and performance may differ materially
from those anticipated in the forward looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements. See the note at
the beginning of this report.

General
National Technical Systems, Inc. is the leading independent provider of testing
and certification services in the United States, serving numerous attractive and
growing end markets. During its more than 50 years in the business, the Company
has built the dominant testing platform in the country. NTS' expansive
geographic presence, experienced sales force, deep client relationships, breadth
of capabilities and continuous innovation are unmatched by any competitor,
making the Company a unique one-stop resource to meet its clients' demanding and
evolving requirements. NTS is accredited by numerous national and international
technical organizations which allow the Company to have its test data accepted
in most countries.

NTS serves customers primarily in the aerospace, defense, telecommunications,
automotive, energy, consumer products, commercial and industrial products and
medical markets. The Company operates facilities throughout the United States as
well as a facility in Vietnam and Germany.

The following discussion should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in the Company's Annual Report on Form 10-K for the year ended January
31, 2013 and the consolidated quarterly financial statements and notes thereto
contained in this report. All information in this report is based upon unaudited
operating results of the Company for the three and six month periods ended July
31, 2013 and 2012.

Markets
Aerospace.

NTS offers integrated life cycle product services to the aerospace market,
including Civil Aviation. These services include engineering, testing,
certification, and supply chain management. From concept development and design,
through, certification, production and in-service life, NTS provides support
throughout the full life cycle of the aerospace product. These integrated
services fill the capability gaps that have developed in the aerospace supply
chains after years of large scale integration, outsourcing and globalization.

NTS provides engineering services that design, develop, test, and integrate pods
& payloads for unmanned systems. This group has expanded from airborne platforms
into ground, sea (surface and subsurface), and robotic platforms. NTS has
conducted test programs for unmanned aerial systems (UAS) components, systems,
payloads and completely integrated air vehicles. NTS is actively engaged in a
variety of unmanned system test programs, and has performed environmental,
vibration and EMI testing on a number of UAS systems.

NTS plays an active role in numerous U.S. defense-related programs, performing a
wide variety of defense technology research, development, test, and evaluation
services for the Department of Defense and other, military and governmental
agencies. These services evaluate the weapons, ordnance, munitions, avionics,
electronics, hydraulic and pneumatic controls, engines and communication systems
that make up the elements of today's modern warfare. The Company's testing
platforms for the defense industry include fixed wing aircraft, helicopters,
submarines, aircraft carriers and other naval ships, tanks and other tracked
vehicles, trucks and road vehicles, command, control and communication systems
and missiles and weapons systems. Testing includes associated system and
component level tests of structures, hardware, electronics, personal protective
equipment, armor, weapons and ammunition.

NTS has facilities that are specially constructed to store, handle, and test
ordnance, munitions and hazardous materials. Routine testing includes live fire,
function, environmental, dynamics, safety, MIL-STD-901 shipboard shock,
insensitive munitions (IM), hazard classification, transportation and packaging
safety. These tests are done for prototype, developmental, qualification and
production/lot acceptance testing. Multiple NTS facilities around the country
provide 200 v/m up to 40 GHz EMI/EMC testing of electronic and communications
equipment. Custom designed NTS data acquisition systems are capable of
collecting data at speeds of 2,000,000 data points per second and digital
photography capability of over 160,000 color photos per second.

NTS' defense group provides energetic and prototype engineering services,
including 2D and 3D CAD modeling; technical data package development and
modification; finite element analysis, projectile design and analysis; interior
and exterior ballistics analysis, and design and development of custom test
hardware and fixtures. Other services include support, procurement and delivery
of precision metal parts and explosive loading of prototype hardware. Additional
defense services include design, development, fabrication, and fielding of
specialized high speed instrumentation and diagnostics for energetics and
hazardous materials and ordnance testing. This includes custom sensor suite
design, fabrication and deployment, often through specialized test facility
design.

Telecommunications.

NTS provides engineering design, test evaluation and certification services for
manufacturers of a broad array of telecommunications networking and storage
equipment intended for commercial data centers, central/telecom offices and
client premise environments. The Company's services are performed in accordance
with domestic and international regulatory standards, the network equipment
building systems (NEBS) specifications, as required by the telecommunications
industry. Globally, NTS represents the largest network of independent test
laboratories (ITL) certified and recognized by most regional bell operating
companies' (RBOCs) carriers. The Company is also certified and accredited to
support formal witness testing on behalf of the RBOC carriers at approved
manufacturer's internal test facilities. Rapid technological change in the
telecommunication market, including the wireless telecom industry, is driving
demand for engineering design, testing evaluation and certification services for
faster and more robust backhaul networking equipment will continue to increase.

The Company is well positioned to support this demand, currently providing
accredited ITL services at laboratories in California, Massachusetts, New
Jersey, Texas and Germany.

Automotive.

NTS supports the commercial and military vehicle industries with testing,
including dynamometer operations on power train components, vibration and shock
on mechanical and electrical assemblies, thermal and corrosion exposures on
control and monitoring systems, pressure pulsing and burst on fluid handling
items and fatigue and ultimate strength on mechanical components. NTS performs
testing to support requirements in emerging markets of pure electric vehicles
and electric hybrid vehicles. This includes electric motors, integrated
motor/transmissions, specialized high speed transmissions, batteries and
control/distribution modules. It also performs HALT and HASS analyzes. These
tests combine extremes of temperature, rapid temperature change, and multi-axis
vibration to rapidly expose design weaknesses and process flaws. NTS is
accredited to ISO 17025 through the American Accreditation of Laboratories
Association (A2LA). This accreditation allows NTS automotive test reports to be
accepted throughout the U.S. and internationally.

· Testing on a variety of smart energy/smart grid products with a focus on the
communications functionality and network protocols of smart meters, smart
outlets, thermostats/in-home displays and smart appliances.

NTS provides engineering design, test evaluation and domestic and international
certification services to manufacturers of a broad array of consumer products
normally procured for use in a residence, school or recreation environment. This
typically includes personal computing, PC peripheral, residential networking and
personal wireless devices. These products are subjected to a wide range of
electromagnetic compatibility, product safety, reliability, usability and
interoperability tests and certifications to assure market compliance,
reliability and effective use. The Company has been approved as an exclusive ITL
to offer internet TV set-top box multimedia over coax (MoCA) certification. The
Company is the exclusive certifications provider for the Sirius/XM radio ready
program and holds a number of domestic and international test accreditations
throughout its network of commercial laboratories. NTS is an accredited
telecommunication certification body (TCB) in North America and an appointed
notified body for wireless devices in the European Union. With the increased
integration of wireless technology into traditional consumer products, the
dramatic population growth, income gains, global macroeconomic shifts and the
urbanization in regions throughout Asia, Central and South America and Africa,
NTS is well positioned to support the growing market spaces to which
manufacturers are seeking to sell. The Company's service offerings offer a
'one-stop-shop' to the consumer product market, ensuring manufacturers a shorter
time to market in the fierce 'race to market.'
Commercial & Industrial.

NTS provides engineering design, test evaluation and domestic and international
certification services to manufacturers of a broad array of commercial and
industrial products normally procured for light and heavy industrial
applications. This covers a wide range of industries from shipbuilding,
semiconductor manufacturing equipment, automation, robotics, laboratory and
materials handling devices. Various types of commercial grade electronic,
hydraulic and pneumatic systems are subjected to electrical, environmental and
safety testing to ensure regulatory compliance and safe and reliable use.

Special combined mechanical and environmental testing processes, such as (HALT
testing), are used to accelerate the effects of aging and wear to allow
manufacturers to produce a more reliable product. Once this has been
accomplished, similar HASS testing can be used to ensure consistent quality on
the production line. Increasingly, these products are incorporating Wireless
Local Area Network (WLAN) and Wide Wireless Access Network (WWAN) communication
technologies, and the requirement for additional testing and certification.

NTS provides engineering design, testing evaluation and domestic and
international certification services to manufacturers of a broad array of
medical products typically including non-invasive devices. Services are limited
to include electromagnetic compatibility, electrical product safety and quality
control/risk analysis consultation. Through various industry partnerships, the
Company has affiliations with consultants and notified bodies to support medical
approval in North America and throughout the European Union. With the increased
integration of wireless communications into traditional medical device products,
NTS is also well equipped to support domestic and international testing and
approvals.

Growth Strategy
NTS' growth strategy is to provide significant focus on corporate development
activities within the mid-to longer-term time horizon, while continuing to drive
efficiencies and market penetration within the shorter-term fiscal planning time
horizon.

NTS' strategies for continued growth include:
· increasing market share through leveraging its geographic reach and providing
superior service that distinguishes it from its competition;
· investing in human and capital resources to strengthen existing capabilities;
· enhancing utilization of resources;
· adding new, innovative service offerings to the Company's repertoire;
· identify, evaluate and acquire companies that can add significant value upon
integration with NTS; and
· continue to integrate companies recently acquired.

Recent Developments
Consolidated revenues for the six months ended July 31, 2013, were $91,203,000,
an increase of $421,000 or 0.5% over the same period last year. The majority of
this increase came from organic growth particularly in the aerospace market,
partially offset by a decrease in the defense market. The increased revenues
combined with prudent cost controls resulted in net income for the period of
$1,667,000.

During the quarter ended July 31, 2013, the Company was involved in discussions
with a number of perspective bidders regarding a potential sale transaction. On
August 15, 2013, the Company entered into an Agreement and Plan of Merger with
Nest Parent, Inc., a Delaware corporation ("Parent"), and Nest Merger Sub, Inc.,
affiliates of Aurora Capital Group. Upon closing, each outstanding share of
Company common stock will be converted into the right to receive an amount in
cash equal to $23.00 per share. Assuming the satisfaction of the conditions set
forth in the Merger Agreement, the Company expects the transaction to close
before the end of 2013. See Note 15 Subsequent Events in the accompanying
financial statements for further detail. Costs incurred during the current
quarter related to this transaction were $300,000 and are included in general
and administrative expenses.

With the completion of the implementation of its ERP system, the company
centralized many of its support activities and effected a reduction in force.

This resulted in restructuring costs of $1,037,000 for the three months ended
July 31, 2013 which included severance and other employment related costs of
$963,000 and other facility consolidation costs of $74,000. These costs are
recorded to restructuring costs on the consolidated statements of operations.

On June 27, 2013, the Company paid off the $7,000,000 subordinated note with
Mill Road Capital as well as accrued interest of $745,000 and a prepayment
penalty of $387,000, using cash generated from operations and draws on the
Company's revolving credit line. The prepayment penalty, accretion of the debt
discount of $558,000 and expensing of prepaid loan fees of $342,000 were charged
to interest expense in the current quarter.

On June 26, 2013, the Company sold its 50% interest in XXCAL Japan for $240,000.

The loss of $14,000 related to the sale is included in other expense.

15
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Unaudited Results of Operations for the Six Months Ended July 31, 2013
Revenues
REVENUES
Six months ended July 31, 2013 2012 % Change
(Dollars in thousands)
Total revenues $ 91,203 $ 90,782 0.5 %
For the six months ended July 31, 2013, consolidated revenues increased by
$421,000 or 0.5% when compared to the same period in fiscal year 2013.

Substantially all of this growth was organic (revenues from businesses owned
throughout both reporting periods) and was primarily related to an increase in
the aerospace market, partially offset by a decrease in the defense market.

Gross Profit
GROSS PROFIT
Six months ended July 31, 2013 2012 % Change
(Dollars in thousands)
Total $ 27,997 $ 24,131 16.0 %
% to total revenues 30.7 % 26.6 %
Gross profit for the six months ended July 31, 2013 increased by $3,866,000 or
16.0% when compared to the same period in fiscal year 2013. Several factors
contributed to the increase, including price increases, favorable project
mix, increased volume, and decreased costs related to the reduction in force.

Also, with the centralization of administrative functions which began in the
first quarter of the current fiscal year, SG&A expense for the six months ended
July 31, 2013 included approximately $1,300,000 of support-related expenses that
were classified as cost of sales in the prior fiscal year. Gross profit as a
percentage of revenue, or gross margin, increased from 26.6% to 30.7%.

Selling, General & Administrative
SELLING, GENERAL & ADMINISTRATIVE
Six months ended July 31, 2013 2012 % Change
(Dollars in thousands)
Total $ 21,578 $ 17,079 26.3 %
% to total revenues 23.7 % 18.8 %
Total selling, general and administrative expenses increased by $4,499,000 or
26.3% for the six months ended July 31, 2013 when compared to the same period in
fiscal year 2013. The increase is mainly due to additional share-based
compensation expense of $2,419,000 driven by the significant increase in the
Company's stock price in this fiscal year, $300,000 in one-time transaction
costs and $1,104,000 in additional incentive compensation. Also, with the
centralization of administrative functions which began in the first quarter of
the current fiscal year, SG&A expense for the first six months of fiscal year
2014 included approximately $1,300,000 of support-related expenses that were
classified as cost of sales in the prior fiscal year.

Restructuring costs
With the completion of the implementation of its ERP system, the Company
centralized many of its support activities and effected a reduction in force.

This resulted in restructuring costs of $1,037,000 for the six months ended July
31, 2013 which included severance and other employment related costs of $963,000
and other facility consolidation costs of $74,000.

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Operating Income
OPERATING INCOME
Six months ended July 31, 2013 2012 % Change
(Dollars in thousands)
Total $ 5,344 $ 6,916 (22.7 )%
% to total revenues 5.9 % 7.6 %
Operating income for the six months ended July 31, 2013 decreased by $1,572,000
or 22.7% when compared to the same period in fiscal year 2013, primarily as a
result of the increase in SG&A expense and restructuring costs, partially offset
by the increase in gross profit.

Interest Expense
Net interest expense increased by $856,000 to $2,655,000 in the six months ended
July 31, 2013 when compared to the same period in fiscal year 2013. The increase
was primarily due to prepayment of the Mill Road subordinated note, which
included the prepayment penalty of $387,000, accretion of the debt discount of
$558,000 and expensing of prepaid loan fees of $342,000, partially offset by
lower debt balances in the current year.

Other Income
Other income was $82,000 for the six months ended July 31, 2013, consisting of
various minor transactions.

Income Taxes
The income tax provision rate for the six months ended July 31, 2013 was 39.8%
compared to 41.2% for the same period in the prior year. Management has
determined that it is more likely than not that the deferred tax assets will be
realized on the basis of offsetting them against the reversal of deferred tax
liabilities. The Company analyzes the value of the deferred income tax asset
quarterly.

Net Income
Net income for the six months ended July 31, 2013 was $1,667,000 compared to
$3,060,000 for the same period in fiscal year 2013. This decrease was primarily
due to higher SG&A expense and restructuring costs, partially offset by higher
gross profit and lower income taxes.

For the six months ended July 31, 2013, net income attributable to
noncontrolling interests was $380,000 compared to $504,000 in the prior year, a
decrease of $124,000 or 24.6%. The decrease was due to the Company's purchase of
the 49.9% minority interest of Unitek Technical Services, a consolidated
subsidiary, on November 8, 2012. Income related to Unitek is no longer included
in noncontrolling interests, since the purchase.

Net income attributable to NTS for the six months ended July 31, 2013 was
$1,287,000 compared to $2,556,000 for the same period in fiscal year 2013. This
decrease was primarily due to lower net income, partially offset by the decrease
in net income attributable to noncontrolling interests.

Adjusted EBITDA
EBITDA (earnings before interest, taxes, depreciation and amortization) as
adjusted to remove the effect of share based compensation expense, or "adjusted
EBITDA", was $13,569,000 for the six months ended July 31, 2013 compared to
$12,520,000 in the same period of the prior year.

Management uses adjusted EBITDA to evaluate the Company's core operations
without reference to the impact of interest and tax payments resulting from its
capital structure and tax jurisdictions, or depreciation and amortization which
can fluctuate based on acquisition activity. Our senior credit facility also
includes covenants related to adjusted EBITDA.

Adjusted EBITDA is a non-GAAP financial measure. The Company calculates adjusted
EBITDA by taking net income, and adding back the expenses related to interest,
taxes, depreciation, amortization, share based compensation expense and non-cash
impairment loss, as each of those elements are calculated in accordance with
GAAP. A reconciliation of the Company's adjusted EBITDA to net income for the
six months ended July 31, 2013 and 2012 is included in the table below.

Gross Profit
GROSS PROFIT
Three months ended July 31, 2013 2012 % Change
(Dollars in thousands)
Total $ 14,467 $ 12,810 12.9 %
% to total revenues 31.3 % 27.1 %
Gross profit for the three months ended July 31, 2013 increased by $1,657,000 or
12.9% when compared to the same period in fiscal year 2013. This increase in
gross profit was primarily due to price increases, favorable project mix and
decreased costs related to the reduction in force. Approximately $600,000 of
support-related expenses were included in cost of sales in the second quarter of
the prior year, which due to the centralization of administrative functions that
began in the first quarter is recorded to SG&A in the current quarter. Gross
profit as a percentage of revenue, or gross margin, increased from 27.1% to
31.3%.

Selling, General & Administrative
SELLING, GENERAL & ADMINISTRATIVE
Three months ended July 31, 2013 2012 % Change
(Dollars in thousands)
Total $ 11,539 $ 8,667 33.1 %
% to total revenues 25.0 % 18.3 %
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Total selling, general and administrative expenses increased by $2,872,000 or
33.1% for the three months ended July 31, 2013 when compared to the same period
in fiscal year 2013. The increase is mainly due to additional share-based
compensation expense of $1,983,000 driven by the significant increase in the
Company's stock price in the current quarter, $300,000 in one-time transaction
costs and $706,000 in additional incentive compensation. Also, with the
centralization of administrative functions which began in the first quarter of
the current fiscal year, SG&A expense for the current quarter included
approximately $600,000 of support-related expenses that were classified as cost
of sales in the prior fiscal year.

Restructuring costs
With the completion of the implementation of its ERP system, the Company
centralized many of its support activities and effected a reduction in force.

This resulted in restructuring costs of $1,037,000 for the three months ended
July 31, 2013 which included severance and other employment related costs of
$963,000 and other facility consolidation costs of $74,000.

Operating Income
OPERATING INCOME
Three months ended July 31, 2013 2012 % Change
(Dollars in thousands)
Total $ 1,885 $ 4,020 (53.1 )%
% to total revenues 4.1 % 8.5 %
Operating income for the three months ended July 31, 2013 decreased by
$2,135,000 or 53.1% when compared to the same period in fiscal year 2013,
primarily as a result of the increase in SG&A expense and restructuring costs,
partially offset by the increase in gross profit.

Interest Expense
Net interest expense increased by $942,000 to $1,864,000 in the three months
ended July 31, 2013 when compared to the same period in fiscal year 2013. The
increase was primarily due to prepayment of the Mill Road subordinated note,
which included the prepayment penalty of $387,000, accretion of the debt
discount of $558,000 and expensing of prepaid loan fees of $342,000, partially
offset by lower debt balances in the current quarter.

Other Income
Other income was $68,000 for the three months ended July 31, 2013, consisting of
various minor transactions.

Income Taxes
The income tax provision rate for the three months ended July 31, 2013 was 42.7%
compared to 41.5% for the same period in the prior year. Management has
determined that it is more likely than not that the deferred tax assets will be
realized on the basis of offsetting them against the reversal of deferred tax
liabilities. The Company analyzes the value of the deferred income tax asset
quarterly.

Net Income
Net income for the three months ended July 31, 2013 was $51,000 compared to
$1,838,000 for the same period in fiscal year 2013. This decrease was primarily
due to higher SG&A expense and restructuring costs, partially offset by higher
gross margin and lower income taxes.

For the three months ended July 31, 2013, net income attributable to
noncontrolling interests was $195,000 compared to $236,000 in the prior year, a
decrease of $41,000 or 17.4%. The decrease was due to the Company's purchase of
the 49.9% minority interest of Unitek Technical Services, a consolidated
subsidiary, on November 8, 2012. Income related to Unitek is no longer included
in noncontrolling interests, since the purchase.

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Net loss attributable to NTS for the three months ended July 31, 2013 was
$144,000 compared to net income attributable to NTS of $1,602,000 for the same
period in fiscal year 2013. This decrease was primarily due to lower net income,
partially offset by the decrease in net income attributable to noncontrolling
interests.

Adjusted EBITDA
EBITDA (earnings before interest, taxes, depreciation and amortization) as
adjusted to remove the effect of share based compensation expense, or "adjusted
EBITDA", was $6,910,000 for the three months ended July 31, 2013 compared to
$7,002,000 in the same period of the prior year.

Management uses adjusted EBITDA to evaluate the Company's core operations
without reference to the impact of interest and tax payments resulting from its
capital structure and tax jurisdictions, or depreciation and amortization which
can fluctuate based on acquisition activity. Our senior credit facility also
includes covenants related to adjusted EBITDA.

Adjusted EBITDA is a non-GAAP financial measure. The Company calculates adjusted
EBITDA by taking net income, and adding back the expenses related to interest,
taxes, depreciation, amortization, share based compensation expense and non-cash
impairment loss, as each of those elements are calculated in accordance with
GAAP. A reconciliation of the Company's adjusted EBITDA to net income for the
three months ended July 31, 2013 and 2012 is included in the table below.